posam
As filed with the Securities and Exchange Commission on March 20, 2008
Registration No. 333-123866
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3
ON
Form S-3
TO REGISTRATION STATEMENT ORIGINALLY FILED ON FORM S-2
under
the Securities Act of 1933
Endocare, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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33-0618093 |
(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.) |
201 Technology Drive
Irvine, California 92618
(949) 450-5400
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants Principal Executive Offices)
Michael R. Rodriguez
Senior Vice President, Finance and Chief Financial Officer
Endocare, Inc.
201 Technology Drive
Irvine, California 92618
(949) 450-5400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With a Copy to:
Clint B. Davis
Senior Vice President, Legal Affairs, General Counsel and Secretary
Endocare, Inc.
201 Technology Drive
Irvine, California 92618
(949) 450-5400
Approximate date of commencement of proposed sale to the public: from time to time after
the effectiveness of this Registration Statement.
If the only securities being registered on this form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box: o
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following box: þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering: o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: o
If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box: o
If this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission, acting pursuant to
said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed Maximum |
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Amount of |
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Title of Each Class of |
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Amount to be |
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Offering |
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Aggregate |
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Registration |
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Securities to be Registered |
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Registered(1) |
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Price per Share(2) |
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Offering Price(2) |
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Fee |
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Common Stock, $0.001 par value per
share(3)
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3,193,375 shares
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$10.05
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$32,093,422
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$3,777(4) |
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(1) |
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All share and price amounts in this registration statement reflect the one-for-three reverse stock split
of the Companys Common Stock that occurred on August 20, 2007. Includes 1,878,459 shares issued to the
selling securityholders in our March 2005 financing and 1,314,916 shares issuable upon the exercise of
common stock purchase warrants held by selling securityholders. In accordance with Rule 416 under the
Securities Act of 1933, also includes an indeterminable number of shares that may become issuable by
reason of stock splits, stock dividends and similar transactions in accordance with the terms of the
common stock purchase warrants. |
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(2) |
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) based on
the average of the high and low sales prices of the registrants common stock as reported on the Pink
Sheets on April 1, 2005, as adjusted to reflect the one-for-three reverse stock split of the Companys
Common Stock that occurred on August 20, 2007. |
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Each share of Common Stock is paired with a stock purchase right under the Registrants Stockholder
Rights Plan. |
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(4) |
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Paid previously with the filing of the original Registration Statement. |
The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED MARCH 20, 2008
PROSPECTUS
Endocare, Inc.
3,193,375 Shares of Common Stock
This prospectus relates to the sale or other disposition of up to 3,193,375 shares of our
common stock by the selling securityholders listed herein or their transferees. The shares
covered hereby may be sold or otherwise disposed of at fixed prices, the prevailing market price
for the shares determined at the time of the sale or other disposition or at negotiated prices.
We will not receive proceeds from the sale of our shares by the selling securityholders.
However, certain of the shares of common stock covered hereby will be issued only upon the
exercise of warrants. Upon exercise of these warrants, we will receive the proceeds of the
exercise price of such warrants if they are exercised other than on a net exercise basis.
Our common stock is registered under Section 12(b) of the Securities Exchange Act of 1934
and is quoted on The NASDAQ Capital Market under the symbol ENDO. On March 19, 2008, the last
reported sale price for our common stock as reported on The NASDAQ Capital Market was $5.98 per
share.
All share and price amounts in this prospectus reflect the one-for-three reverse stock split
of our common stock that occurred on August 20, 2007.
Investing in the common stock involves certain risks. See Risk Factors beginning on page 3
for a discussion of these risks.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is , 2008.
TABLE OF CONTENTS
No person has been authorized to give any information or to make any representations other
than those contained in this prospectus in connection with the offering made hereby, and if given
or made, such information or representations must not be relied upon as having been authorized by
Endocare, Inc., any selling securityholder or by any other person. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any security other than the
securities covered by this prospectus, nor does it constitute an offer to or solicitation of any
person in any jurisdiction in which such offer or solicitation may not lawfully be made.
PROSPECTUS SUMMARY
Business
Endocare, Inc. is a Delaware corporation. Our principal executive offices are located at 201
Technology Drive, Irvine, California 92618. Our telephone number is (949) 450-5400. The address
of our website is www.endocare.com. Information on our website is not part of this prospectus.
We are a specialty medical device company focused on improving patients lives through the
development, manufacturing and distribution of health care products for cryoablation. The term
cryoablation or cryosurgery refers to the use of ice to destroy tissue, such as tumors, for
therapeutic purposes.
Today, our FDA-cleared Cryocare Surgical System occupies a growing position in the urological
market for treatment of prostate and renal cancers. Because of our initial concentration on
prostate and renal cancers, the majority of our sales and marketing resources are directed toward
the promotion of our technology to urologists. We also employ a dedicated sales team focused on
the interventional radiology market in which our products are used to treat renal, liver and lung
cancer and for palliative intervention. In addition to selling our cryoablation disposable
products to hospitals and mobile service companies, we contract directly with hospitals for the use
of our Cryocare Surgical System and disposable products on a fee-for-service basis. We intend to
continue to identify and develop new markets for our cryoablation products and technologies,
particularly in the area of tumor ablation.
This prospectus covers the sale or other disposition of up to 3,193,375 of our shares from
time to time by the selling securityholders listed herein or their transferees. Of these shares,
1,878,459 shares were originally acquired by the selling securityholders in a private placement
financing that we completed on March 11, 2005 and the remaining 1,314,916 shares may be issued by
us in the future upon the exercise of warrants acquired by the selling securityholders in the
private placement financing that we completed on March 11, 2005.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements may include statements regarding, among other things, (a)
our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our
industry, (d) our future financing plans, and (e) our anticipated needs for working capital.
Forward-looking statements, which involve assumptions and describe our future plans, strategies,
and expectations, are generally identifiable by use of the words may, will, should, expect,
anticipate, estimate, believe, intend, or project or the negative of these words or other
variations on these words or comparable terminology. This information may involve known and
unknown risks, uncertainties, and other factors that may cause our actual results, performance, or
achievements to be materially different from the future results, performance, or achievements
expressed or implied by any forward-looking statements. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under Risk Factors and matters described in
this prospectus generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained or incorporated by reference in this filing will in
fact occur. In addition to the information expressly required to be included in this filing, we
will provide such further material information, if any, as may be necessary to make the required
statements, in light of the circumstances under which they are made, not misleading.
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RISK FACTORS
You should carefully consider the risks described below before purchasing our common stock.
Our most significant risks and uncertainties are described below; however, they are not the only
risks we face. If any of the following risks actually occur, our business, financial condition, or
results of operations could be materially adversely affected, the trading price of our common stock
could decline, and you may lose all or part of your investment therein. You should acquire shares
of our common stock only if you can afford to lose your entire investment.
Risks Associated With our Business
We have a limited operating history with significant losses and expect losses to continue for the
foreseeable future.
We have yet to establish any history of profitable operations. We have incurred losses from
operations of $9.3 million, $15.4 million and $16.6 million, respectively, during the fiscal years
ended December 31, 2007, 2006 and 2005. As a result, at December 31, 2007 we had an accumulated
deficit of $189.8 million. We have incurred net losses from continuing operations of $8.9 million,
$11.1 million and $14.8 million, respectively, during the fiscal years ended December 31, 2007,
2006 and 2005. Our revenues have not been sufficient to sustain our operations. We expect that
our revenues will not be sufficient to sustain our operations for the foreseeable future. We can
give no assurances when or whether we will ever be profitable.
We may require additional financing in the future to sustain our operations and without it we may
not be able to continue operations.
We had an operating cash flow deficit of $4.6 million, $13.6 million and $14.7 million for the
years ended December 31, 2007, 2006 and 2005.
On May 25, 2007, we sold $7.0 million in stock to Frazier Healthcare V, L.P. (Frazier). In
addition, as of June 30, 2007, we had sold $1.6 million in stock under our $16.0 million common
stock purchase agreement with Fusion Capital Fund II, LLC (Fusion Capital).
The availability of funds under the $16.0 million common stock purchase agreement with Fusion
Capital and our $4.0 million credit agreement with Silicon Valley Bank is subject to many
conditions, some of which are predicated on events that are not within our control. Accordingly,
we cannot guarantee that these capital resources will be available or will be sufficient to fund
our ongoing operations.
We only have the right to receive $100,000 every four business days under the agreement with
Fusion Capital unless our stock price equals or exceeds $4.50, in which case we can sell greater
amounts to Fusion Capital as the price of our common stock increases. Fusion Capital does not have
the obligation to purchase any shares of our common stock on any business day that the market price
of our common stock is less than $3.00. Since we have authorized 2,666,666 shares for sale to
Fusion Capital under the common stock purchase agreement, the selling price of our common stock to
Fusion Capital will have to average at least $6.00 per share for us to receive the maximum proceeds
of $16.0 million.
Under our credit agreement with Silicon Valley Bank, funds available for borrowing are based
on eligible trade receivables and inventory as defined. The credit agreement contains a subjective
acceleration clause and a requirement to maintain a lockbox with the lender to which
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all receivable collections are deposited. Under the subjective acceleration clause, the
lender may accelerate repayment of amounts borrowed and/or cease making advances to us if it
determines that a material adverse change has occurred in our business or our ability to meet our
obligations under the agreement. In addition, the proceeds from the lock box will be applied to
reduce the outstanding borrowings upon an event of default (including the occurrence of a material
adverse change) or if trigger events occur. Our ability to access funds under the credit agreement
will be subject to our ability to meet all restrictive covenants and comply with all
representations and warranties.
The extent to which we rely on Fusion Capital as a source of funding will depend on a number
of factors including the prevailing market price of our common stock and the extent to which we are
able to secure working capital from other sources, such as through the sale of our products. If
sufficient financing from Fusion Capital were to prove unavailable or prohibitively dilutive and if
we are unable to sell enough of our products, we may need to secure another source of funding in
order to satisfy our working capital needs. Even if we are able to access the full $16.0 million
under the common stock purchase agreement with Fusion Capital, we may still need additional capital
to fully implement our business, operating and development plans. Should the financing we require
to sustain our working capital needs be unavailable or prohibitively expensive when we require it,
the consequences could have a material adverse effect on our business, financial condition, results
of operations and cash flows.
The sale of our common stock to Fusion Capital may cause dilution and the sale of the shares of
common stock acquired by Fusion Capital could cause the price of our common stock to decline.
In connection with entering into the common stock purchase agreement with Fusion Capital, we
authorized the sale to Fusion Capital of up to 2,666,666 shares of our common stock, in addition to
the 157,985 shares that we issued to Fusion Capital as a commitment fee. The number of shares
ultimately offered for sale by Fusion Capital is dependent upon the number of shares purchased by
Fusion Capital under the agreement. The purchase price for the common stock to be sold to Fusion
Capital pursuant to the common stock purchase agreement will fluctuate based on the price of our
common stock. All 2,824,651 shares that we have registered pursuant to our registration rights
agreement with Fusion Capital are freely tradable. It is anticipated that shares registered will
be sold over a period of up to 24 months. Depending upon market liquidity at the time, a sale of
shares by Fusion Capital at any given time could cause the trading price of our common stock to
decline. Fusion Capital may ultimately purchase all or some of the 2,666,666 shares of common
stock authorized for sale to Fusion Capital under the common stock purchase agreement. After it
has acquired such shares, it may sell all, some or none of such shares. Therefore, sales to Fusion
Capital by us under the common stock purchase agreement may result in substantial dilution to the
interests of other holders of our common stock. The sale of a substantial number of shares of our
common stock by Fusion Capital, or anticipation of such sales, could make it more difficult for us
to sell equity or equity-related securities in the future at a time and at a price at which we
might otherwise wish to effect sales. However, we have the right to control the timing and amount
of any sales of our shares to Fusion Capital and the agreement may be terminated by us at any time
at our discretion without any cost to us. As of February 29, 2008, we had sold an aggregate of
293,397 shares to Fusion Capital under the common stock purchase agreement, in addition to the
157,985 shares that we issued to Fusion Capital as a commitment fee.
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Our business may be materially and adversely impacted by the loss of our largest customer or the
reduction, delay or cancellation of orders from this customer; in addition, our business may be
materially and adversely impacted if this customer delays payment or fails to pay for products sold
to this customer.
For the three and twelve months ended December 31, 2007 our largest customer accounted for
43.3% and 42.1%, respectively, of our revenues, and as of December 31, 2007 this customer accounted
for 38.9% of our accounts receivable. Our sales to this customer may be materially and adversely
impacted by various factors relating to this customers business, financial condition, results of
operations and cash flows. Our business, financial condition, results of operations and cash flows
may be materially and adversely impacted by the loss of this customer, or the reduction, delay or
cancellation of orders. In addition, our business, financial condition, results of operations and
cash flows may be materially and adversely impacted if this customer delays payment or fails to pay
for products sold. This customer is not obligated to purchase a specific quantity of our products
or provide binding forecasts of purchases for any period.
We may be required to make tax payments that exceed our settlement estimates.
As of December 31, 2006 and 2007 we estimated that we owed $2.8 million and $2.2 million,
respectively, as of each balance sheet date in state and local taxes, primarily sales and use
taxes, in various jurisdictions in the United States. We are in the process of negotiating
resolutions of the past due tax obligations with the applicable tax authorities. While we hope
that these obligations can be settled for less than the amounts accrued, we cannot predict whether
we will obtain favorable settlement terms from the various tax authorities, or that, after
settling, we will satisfy the conditions necessary to avoid violating the settlements. Our failure
to obtain favorable settlement terms or to satisfy the settlement conditions may result in a
material adverse effect on our business, financial condition, results of operations and cash flows.
We may incur significant expenses in the future as a result of our obligation to pay legal fees for
and otherwise indemnify former officers and former directors.
Certain former officers and former directors continue to be involved in investigations and
related legal proceedings brought by the SEC and the Department of Justice. We are contractually
obligated to pay legal fees for and otherwise indemnify these former officers and former directors.
We may incur significant expenses in the future as a result of these obligations. The amount of
these expenses is unpredictable and outside of our control and could have a material adverse effect
on our business, financial condition, results of operations and cash flows.
Our success will depend on our ability to attract and retain key personnel.
In order to execute our business plan, we need to attract, retain and motivate a significant
number of highly qualified managerial, technical, financial and sales personnel. If we fail to
attract and retain skilled scientific and sales personnel, our research and development and sales
and marketing efforts will be hindered. Our future success depends to a significant degree upon
the continued services of key management personnel. None of our key management personnel is
covered by an insurance policy of which we are the beneficiary.
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Our success is reliant on the acceptance by doctors and patients of the Cryocare Surgical System as
a preferred treatment for tumor ablation.
Cryoablation has existed for many years, but has not been widely accepted primarily due to
concerns regarding safety and efficacy and widespread use of alternative therapies. Because the
technology previously lacked precise monitoring capabilities, prostate cryoablation procedures
performed in the 1970s resulted in high cancer recurrence and negative side effects, such as rectal
fistulae and incontinence, and gave cryoablation treatment negative publicity. To overcome these
negative side effects, we have developed ultrasound guidance and temperature sensing to enable more
precise monitoring in our Cryocare Surgical System. Nevertheless, we will need to overcome the
earlier negative publicity associated with cryoablation in order to obtain market acceptance for
our products. In addition, use of our Cryocare Surgical System requires significant physician
education and training. As a result, we may have difficulty obtaining recommendations and
endorsements of physicians and patients for our Cryocare Surgical System. We may also have
difficulty raising the brand awareness necessary to generate interest in our Cryocare Surgical
System. Any adverse side effects, including impotence or incontinence, recurrence of cancer or
future reported adverse events or other unfavorable publicity involving patient outcomes from the
use of cryoablation, whether from our products or the products of our competitors, could adversely
affect acceptance of cryoablation. In addition, emerging new technologies and procedures to treat
prostate cancer may negatively affect the market acceptance of cryoablation. If our Cryocare
Surgical System does not achieve broad market acceptance, we will likely remain unprofitable.
We are faced with intense competition and rapid technological and industry change, which may make
it more difficult for us to achieve significant market penetration.
The medical device industry generally, and the cancer treatment market in particular, are
characterized by rapid technological change, changing customer needs and frequent new product
introductions. If our competitors existing products or new products are more effective than or
considered superior to our products, the commercial opportunity for our products will be reduced or
eliminated. We face intense competition from companies in the cryoablation marketplace as well as
companies offering other treatment options, including radical prostatectomy, radiation therapy and
hormone therapy. If we are successful in penetrating the market for treatment of prostate cancer
with our cryoablation treatment, other medical device companies may be attracted to the
marketplace. Many of our potential competitors are significantly larger than we are and have
greater financial, technical, research, marketing, sales, distribution and other resources than we
do. We believe there will be intense price competition for products developed in our markets. Our
competitors may develop or market technologies and products that are more effective or commercially
attractive than any that we are developing or marketing. Our competitors may obtain regulatory
approval and introduce and commercialize products before we do. These developments could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
Even if we are able to compete successfully, we may not be able to do so in a profitable manner.
If we are unable to continue to enhance our Cryocare Surgical System, our business will suffer.
Our growth depends in part on continued ability to successfully develop, manufacture and
commercialize enhancements to our Cryocare Surgical System. We may experience difficulties that
could delay or prevent the successful development, manufacturing and commercialization of these
products. Our products in development may not prove safe and effective in clinical trials.
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Clinical trials may identify significant technical or other obstacles that must be overcome
before obtaining necessary regulatory or reimbursement approvals. In addition, our competitors may
succeed in developing commercially viable products that render our products obsolete or less
attractive. Failure to successfully develop, manufacture and commercialize new products and
enhancements could have a material adverse effect on our business, financial condition, results of
operations and cash flows.
There is uncertainty relating to third-party reimbursement, which is critical to market acceptance
of our products.
Hospitals and other health care providers in the United States generally rely on third-party
payers, principally federal Medicare, state Medicaid and private health insurance plans, to
reimburse all or part of the cost of medical procedures involving our products. While private
health insurers in some areas of the United States provide reimbursement for procedures in which
our products are used, we can provide no assurance that private insurance reimbursement will be
adopted nationally or by additional insurers. Furthermore, those private insurance companies
currently paying for procedures in which our products are used may terminate such coverage. If
reimbursement levels from Medicare, Medicaid, other governmental health care programs or private
insurers are not sufficient, physicians may choose not to recommend, and patients may not choose,
procedures using our products.
International market acceptance of our products may depend, in part, upon the availability of
reimbursement within prevailing health care payment systems. Reimbursement and health care payment
systems in international markets vary significantly by country, and include both government
sponsored health care and private insurance. We may not obtain international reimbursement
approvals in a timely manner, if at all. Our failure to receive international reimbursement
approvals may negatively impact market acceptance of our products in the international markets in
which those approvals are sought.
From time to time significant attention has been focused on reforming the health care system
in the United States and other countries. Any changes in Medicare, Medicaid or third-party medical
expense reimbursement, which may arise from health care reform, may have a material adverse effect
on reimbursement for our products or procedures in which our products are used and may reduce the
price we are able to charge for our products. In addition, changes to the health care system may
also affect the commercial acceptance of products we are currently developing and products we may
develop in the future. Potential changes that have been considered include controls on health care
spending and price controls. Several proposals have been made in the United States Congress and
various state legislatures recently that, if adopted, would potentially reduce health care
spending, which may result in a material adverse effect on our business, financial condition,
results of operations and cash flows.
If we fail to protect our intellectual property rights, our competitors may take advantage of our
ideas and compete directly against us.
Our success will depend to a significant degree on our ability to secure and protect
intellectual property rights and to enforce patent and trademark protections relating to our
technology. From time to time, litigation may be advisable to protect our intellectual property
position. However, these legal means afford only limited protection and may not adequately protect
our rights or permit us to gain or keep any competitive advantage. Any litigation in this regard
could be costly, and it is possible that we will not have sufficient resources to fully pursue
litigation or to protect our other intellectual property rights. Litigation could result in the
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rejection or invalidation of our existing and future patents. Any adverse outcome in
litigation relating to the validity of our patents, or any failure to pursue litigation or
otherwise to protect our patent position, could have a material adverse effect on our business,
financial condition, results of operations and cash flows. Also, even if we prevail in litigation,
the litigation would be costly in terms of management distraction as well as in terms of money. In
addition, confidentiality agreements with our employees, consultants, customers, and key vendors
may not prevent the unauthorized disclosure or use of our technology. It is possible that these
agreements could be breached or that they might not be enforceable in every instance, and that we
might not have adequate remedies for any such breach. Enforcement of these agreements may be
costly and time consuming. Furthermore, the laws of foreign countries may not protect our
intellectual property rights to the same extent as the laws of the United States.
Because the medical device industry is litigious, we may be sued for allegedly violating the
intellectual property rights of others.
The medical technology industry has in the past been characterized by a substantial amount of
litigation and related administrative proceedings regarding patents and intellectual property
rights. In addition, major medical device companies have used litigation against emerging growth
companies as a means of gaining or preserving a competitive advantage.
Should third parties file patent applications or be issued patents claiming technology also
claimed by us in pending applications, we may be required to participate in interference
proceedings in the United States Patent and Trademark Office to determine the relative priorities
of our inventions and the third parties inventions. We could also be required to participate in
interference proceedings involving our issued patents and pending applications of another entity.
An adverse outcome in an interference proceeding could require us to cease using the technology or
to license rights from prevailing third parties.
Third parties may claim we are using their patented inventions and may go to court to stop us
from engaging in our normal operations and activities. These lawsuits are expensive to defend and
conduct and would also consume and divert the time and attention of our management. A court may
decide that we are infringing a third partys patents and may order us to cease the infringing
activity. A court could also order us to pay damages for the infringement. These damages could be
substantial and could have a material adverse effect on our business, financial condition, results
of operations and cash flows.
If we are unable to obtain any necessary license following an adverse determination in
litigation or in interference or other administrative proceedings, we would have to redesign our
products to avoid infringing a third partys patent and could temporarily or permanently have to
discontinue manufacturing and selling some of our products. If this were to occur, it would
negatively impact future sales and, in turn, our business, financial condition, results of
operations and cash flows.
If we fail to obtain or maintain necessary regulatory clearances or approvals for products, or if
approvals are delayed or withdrawn, we will be unable to commercially distribute and market our
products or any product modifications.
Government regulation has a significant impact on our business. Government regulation in the
United States and other countries is a significant factor affecting the research and development,
manufacture and marketing of our products. In the United States, the Food and Drug Administration
(FDA) has broad authority under the federal Food, Drug and Cosmetic
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Act (the FD&C Act) to regulate the development, distribution, manufacture and sale of medical
devices. Foreign sales of drugs and medical devices are subject to foreign governmental regulation
and restrictions, which vary from country to country. The process of obtaining FDA and other
required regulatory clearances and approvals (collectively, approvals) is lengthy and expensive.
We may not be able to obtain or maintain necessary approvals for clinical testing or for the
manufacturing or marketing of our products. Failure to comply with applicable regulatory approvals
can, among other things, result in fines, suspension or withdrawal of regulatory approvals, product
recalls, operating restrictions and criminal prosecution. In addition, governmental regulations
may be established which could prevent, delay, modify or rescind regulatory approval of our
products. Any of these actions by the FDA, or change in FDA regulations, could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
Regulatory approvals, if granted, may include significant limitations on the indicated uses
for which our products may be marketed. In addition, to obtain such approvals, the FDA and foreign
regulatory authorities may impose numerous other requirements on us. FDA enforcement policy
prohibits the marketing of approved medical devices for unapproved uses. In addition, product
approvals can be withdrawn for failure to comply with regulatory standards or unforeseen problems
following initial marketing. We may not be able to obtain or maintain regulatory approvals for our
products on a timely basis, or at all, and delays in receipt of or failure to receive such
approvals, the loss of previously obtained approvals or failure to comply with existing or future
regulatory requirements could have a material adverse effect on our business, financial condition,
results of operations and cash flows.
Our products may be subject to product recalls even after receiving FDA clearance or approval,
which would harm our reputation and our business.
The FDA and similar governmental authorities in other countries have the authority to request
and, in some cases, require the recall of our products in the event of material deficiencies or
defects in design, manufacture or labeling or in the event of patient injury. A governmental
mandated or voluntary recall by us could occur as a result of component failures, manufacturing
errors or design defects. Any recall of product would divert managerial and financial resources
and harm our reputation with customers and our business, impact our ability to distribute the
recalled product in the future, require costly redesign or manufacturing changes and leave the
company vulnerable to additional regulatory sanctions and product liability litigation.
We could be negatively impacted by future interpretation or implementation of the federal
anti-kickback and Stark laws and other federal and state anti-self-referral and anti-kickback laws.
Centers for Medicare & Medicaid Services (CMS) recently issued a final rule, making a number
of changes to the current Stark law regulations. The final rule, which was effective December 4,
2007, does not change the current status of our financial relationships. However, CMS also
recently issued additional proposed changes to the Stark Law regulations which could, depending on
the final version of those regulations and how they are interpreted, change the status of certain
physician-owned entities that purchase or lease our products. As of November 2007, CMS has decided
to delay publication of the final version of those proposed Stark law rules. We expect that CMS
will issue the new rules, and may issue additional guidance, in 2008. However, we are unable to
predict whether, and the extent to which, the new rules or guidance will affect our business.
Depending on the content of the new rules or guidance, we may incur significant time and expenses
in the future to restructure existing business relationships.
9
If we become subject to product liability claims, we may be required to pay damages that exceed our
insurance coverage.
Our business exposes us to potential product liability claims that are inherent in the
testing, production, marketing and sale of medical devices. While we believe that we are
reasonably insured against these risks, we may not maintain insurance in amounts or scope
sufficient to provide us with adequate coverage. A claim in excess of our insurance coverage would
have to be paid out of cash reserves, which could have a material adverse effect on our business,
financial condition, results of operations and cash flows. In addition, any product liability
claim could harm our reputation in the industry and our business.
Our intangible assets could become impaired.
Intangible assets acquired in a purchase, such as intellectual property or developed
technology, are generally amortized over various periods depending on their anticipated economic
benefits or useful lives. Long-lived assets, including amortizable intangibles, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be
generated by the asset. Following a review, if such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying value of the assets
exceeds the fair value of the assets. Significant estimates, including assumptions regarding
future events and circumstances that cannot be easily predicted, are required to perform an
analysis of the value of intangible assets. These estimates and assumptions may differ materially
from actual outcomes and occurrences.
Our facilities and systems are vulnerable to natural disasters or other catastrophic events.
Our headquarters, cryoablation products manufacturing facilities, research facilities and much
of our infrastructure, including computer servers, are located in California, an area that is
susceptible to earthquakes and other natural disasters. A natural disaster or other catastrophic
event, such as an earthquake, fire, flood, severe storm, break-in, terrorist attack or other
comparable problems could cause interruptions or delays in our business and loss of data or render
us unable to accept and fulfill customer orders in a timely manner, or at all. We have no formal
disaster recovery plan and our business interruption insurance may not adequately compensate us for
losses that may occur. In the event that an earthquake, natural disaster or other catastrophic
event were to destroy any part of our facilities or interrupt our operations for any extended
period of time, or if harsh weather conditions prevent us from delivering products in a timely
manner, it could have a material adverse effect on our business, financial condition, results of
operations and cash flows.
Risks Associated with an Investment in Our Common Stock
The market price of our common stock is highly volatile.
The market price of our common stock has been and is expected to continue to be highly
volatile. Various factors, including announcements of technological innovations by us or other
companies, regulatory matters, new or existing products or procedures, concerns about our financial
position, operating results, litigation, government regulation, developments or disputes relating
to agreements, patents or proprietary rights, may have a significant impact on the market
price of our stock. If our operating results are below the expectations of securities
analysts or investors, the market price of our common stock may fall abruptly and significantly.
10
Future sales of shares of our common stock may negatively affect our stock price.
Future sales of our common stock, including shares issued upon the exercise of outstanding
options and warrants or hedging or other derivative transactions with respect to our stock, could
have a significant negative effect on the market price of our common stock. These sales also might
make it more difficult for us to sell equity securities or equity-related securities in the future
at a time and price that we would deem appropriate.
We had an aggregate of 11,773,293 shares of common stock outstanding as of February 29, 2008,
which includes 1,878,448 shares of our common stock that we issued on March 11, 2005 in a private
placement financing, 451,382 shares of our common stock that we have issued to Fusion Capital since
October 2006 (which includes the 157,985 shares issued to Fusion Capital as a commitment fee) and
1,085,271 shares of our common stock that we issued to Frazier on May 25, 2007.
Investors in our March 2005 financing also received warrants to purchase an aggregate of
657,446 shares of our common stock at an exercise price of $10.50 per share and 657,446 shares of
our common stock at an exercise price of $12.00 per share. These warrants have an anti-dilution
clause that in certain circumstances reduces the effective exercise price of the warrants and
proportionately increases the number of shares underlying the warrants to preserve the ownership of
the warrant holders. As a result of our issuances to Fusion Capital and Frazier described above,
the exercise price of the Series A Warrants decreased to $10.02 to effectively provide holders the
right to purchase an additional 31,667 shares and the exercise price of the Series B Warrants
decreased to $11.37 to effectively provide holders the right to purchase an additional 37,191
shares.
We entered into registration rights agreements in connection with these financings pursuant to
which we agreed to register for resale by the investors the shares of common stock issued. Sales
of shares covered by these registration statements could have a material adverse effect on the
market price of our shares.
We could be difficult to acquire due to anti-takeover provisions in our charter, our stockholders
rights plan and Delaware law.
Provisions of our certificate of incorporation and bylaws may have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party from attempting to
acquire control of our company. In addition, we have adopted a stockholder rights plan in which
preferred stock purchase rights were distributed as a dividend. These provisions may make it more
difficult for stockholders to take corporate actions and may have the effect of delaying or
preventing a change in control. These provisions also could deter or prevent transactions that
stockholders deem to be in their interests. In addition, we are subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. Subject to specified
exceptions, this section provides that a corporation may not engage in any business combination
with any interested stockholder during the three-year period following the time that such
stockholder becomes an interested stockholder. This provision could have the effect of delaying or
preventing a change of control of our company. The foregoing factors could reduce the price that
investors or an acquirer might be willing to pay in the future for shares of our common stock.
11
USE OF PROCEEDS
All net proceeds from the sale or other disposition of the shares covered hereby will be
received by the selling securityholders. We will receive no proceeds from the sale or other
disposition of the shares covered hereby. However, certain of the shares of common stock covered
hereby will be issued only upon the exercise of warrants issued in connection with our March 2005
equity financing described below. Upon exercise of these warrants, we will receive the proceeds of
the exercise price of such warrants if they are exercised other than on a net exercise basis. To
the extent we receive cash upon exercise of the warrants, we intend to use the cash for general
corporate purposes. We are obligated to pay a transaction fee equal to 6.0 percent of any proceeds
we receive to an investment advisory firm under a pre-existing capital advisory agreement.
THE SELLING SECURITYHOLDERS
The following table sets forth, as of February 29, 2008, the names of the selling
securityholders, the number of shares of our common stock beneficially owned by each selling
securityholder before and after this offering and the number of shares that may be offered pursuant
to this prospectus. This information is based on information provided by or on behalf of the
selling securityholders and, with regard to the beneficial holdings of the selling securityholders,
is accurate only to the extent beneficial holdings information was disclosed to us by or on behalf
of the selling securityholders. The selling securityholders and holders listed in any supplement
to this prospectus, and any transferors, pledgees, donees or successors to these persons, may from
time to time offer and sell, pursuant to this prospectus and any subsequent prospectus supplement,
any and all of these shares or interests therein. Any supplement to this prospectus may contain
additional or varied information about the selling securityholders and/or additional holders, and
any of their transferors, pledgees, donees or successors, the names of natural persons with voting
or investment control over the shares covered hereby, and the aggregate amount of the shares
offered that is beneficially owned by each person. This information will be obtained from the
selling securityholders and/or additional holders.
As of February 29, 2008, 11,773,293 shares of our common stock were outstanding. The
3,193,375 shares of our common stock registered for public resale pursuant to the registration
statement of which this prospectus is a part include 1,878,459 shares of our common stock issued to
the selling securityholders in our March 2005 equity financing described below and 1,314,916 shares
of our common stock that may be issued upon the exercise of warrants issued to the selling
securityholders in our March 2005 equity financing.
Shares listed under the column Shares Offered by this Prospectus represent the number of
shares that may be sold by each selling securityholder pursuant to this prospectus. Pursuant to
Rule 416 of the Securities Act of 1933, the registration statement of which this prospectus is a
part also covers any additional shares of our common stock which become issuable in connection with
such shares resulting from stock splits, stock dividends or similar transactions.
The information under the heading Shares Beneficially Owned After the Offering assumes each
selling securityholder sells all of its shares covered hereby to unaffiliated third parties, that
the selling securityholders will acquire no additional shares of our common stock prior to the
completion of this offering, and that any other shares of our common stock beneficially owned by
the selling securityholders will continue to be beneficially owned. Each selling securityholder
may dispose of all, part or none of its shares.
12
For purposes of the table below, beneficial ownership is determined in accordance with the
rules of the SEC, and includes voting and investment power with respect to shares. Shares of
common stock subject to options, warrants or issuable upon conversion of convertible securities
currently exercisable or exercisable within 60 days from February 29, 2008 are deemed outstanding
for computing the percentage ownership of the person holding the options, warrants or convertible
securities, but are not deemed outstanding for computing the percentage of any other person.
Warrants issued in our March 2005 equity financing are currently exercisable, and therefore the
shares underlying those warrants are included for purposes of determining beneficial ownership.
The selling securityholders identified below may have sold, transferred or otherwise disposed
of all or a portion of their shares of common stock in transactions exempt from the registration
requirements of the Securities Act of 1933 since the date on which they provided to us the
information regarding their shares of common stock.
Except as indicated below, none of the selling securityholders has held any position or office
or had any other material relationship with us or any of our predecessors or affiliates within the
past three years other than as a result of the ownership of our securities. We may amend or
supplement this prospectus from time to time to update the disclosure set forth in it.
Each of the selling securityholders that is affiliated with a registered broker-dealer has
represented to us that it purchased the shares offered by this prospectus in the ordinary course of
business and, at the time of purchase of those shares, did not have any plans to dispose of those
shares.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially |
|
|
|
|
|
Shares Beneficially |
|
|
Owned Prior to the Offering |
|
Shares Offered by |
|
Owned After the Offering(3) |
Selling Securityholders(1) |
|
Number |
|
Percent(2) |
|
this Prospectus |
|
Number |
|
Percent(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arbor Partners, L.P.(4) |
|
|
25,460 |
(5) |
|
|
* |
|
|
|
24,196 |
|
|
|
1,264 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bregman, Lior |
|
|
44,322 |
(7) |
|
|
* |
|
|
|
42,118 |
|
|
|
2,204 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Milford Pension & Retirement Fund(8) |
|
|
94,021 |
(9) |
|
|
* |
|
|
|
92,038 |
|
|
|
1,983 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Stamford Firemens Pension Fund(10) |
|
|
41,791 |
(11) |
|
|
* |
|
|
|
40,912 |
|
|
|
879 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crestview Capital Master, LLC(12) |
|
|
35,456 |
(13) |
|
|
* |
|
|
|
33,694 |
|
|
|
1,762 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniels, John and Daniels, AnnaMarie, as Trustees of The
Daniels Family Trust UTA 1993(14) |
|
|
62,693 |
(15) |
|
|
* |
|
|
|
61,371 |
|
|
|
1,322 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Schwab & Co Inc. FBO Craig T. Davenport Roth
Conversion IRA(16) |
|
|
20,700 |
(17) |
|
|
* |
|
|
|
20,265 |
|
|
|
435 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Schwab & Co Inc. FBO Craig T. Davenport Sep
IRA(18) |
|
|
17,957 |
(19) |
|
|
* |
|
|
|
17,579 |
|
|
|
378 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excelsior Master Fund, LP(20) |
|
|
88,300 |
(21) |
|
|
* |
|
|
|
84,235 |
|
|
|
4,065 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleming, Hayden R. and Fleming, LaDonna M., as Trustees
of the Hayden R. Fleming Revocable Trust dated as of
July 19, 1995(22) |
|
|
143,106 |
(23) |
|
|
1.2 |
% |
|
|
102,286 |
|
|
|
40,820 |
(23) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GW2001 Fund, L.P.(24) |
|
|
90,039 |
(25) |
|
|
* |
|
|
|
22,442 |
|
|
|
67,597 |
(25) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Haimovitch, Larry, as Trustee of the Larry Haimovitch
2000 Separate Property Revocable Trust(26) |
|
|
76,209 |
(27) |
|
|
* |
|
|
|
5,114 |
|
|
|
71,095 |
(27) |
|
|
* |
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially |
|
|
|
|
|
Shares Beneficially |
|
|
Owned Prior to the Offering |
|
Shares Offered by |
|
Owned After the Offering(3) |
Selling Securityholders(1) |
|
Number |
|
Percent(2) |
|
this Prospectus |
|
Number |
|
Percent(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JP Morgan Trust Co. (Bahamas) Limited as Trustee U/A/D
11/3/93(28) |
|
|
35,539 |
(29) |
|
|
* |
|
|
|
34,792 |
|
|
|
747 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kotler, Kevin |
|
|
8,860 |
(30) |
|
|
* |
|
|
|
8,424 |
|
|
|
436 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwood Capital Partners QP, L.P.(31) |
|
|
14,179 |
(32) |
|
|
* |
|
|
|
13,478 |
|
|
|
701 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwood Capital Partners, L.P.(33) |
|
|
30,137 |
(34) |
|
|
* |
|
|
|
28,640 |
|
|
|
1,497 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norwalk Employees Pension Plan(35) |
|
|
36,582 |
(36) |
|
|
* |
|
|
|
35,812 |
|
|
|
770 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nydam, William J.(37) |
|
|
67,823 |
(38) |
|
|
* |
|
|
|
65,617 |
|
|
|
2,206 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paragon Associates, J.V.(39) |
|
|
89,009 |
(40) |
|
|
* |
|
|
|
84,236 |
|
|
|
4,773 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prothro Family Limited Partnership Ltd.(41) |
|
|
26,592 |
(42) |
|
|
* |
|
|
|
25,270 |
|
|
|
1,322 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Employee Retirement System of Idaho(43) |
|
|
208,981 |
(44) |
|
|
1.8 |
% |
|
|
204,567 |
|
|
|
4,414 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SRB Greenway Capital, L.P.(45) |
|
|
15,136 |
(46) |
|
|
* |
|
|
|
14,388 |
|
|
|
748 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SRB Greenway Capital (QP), L.P.(45) |
|
|
107,863 |
(47) |
|
|
* |
|
|
|
102,490 |
|
|
|
5,373 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SRB Greenway Offshore Operating Fund, L.P.(45) |
|
|
9,969 |
(48) |
|
|
* |
|
|
|
9,476 |
|
|
|
493 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walker Smith Capital, L.P.(45) |
|
|
21,653 |
(49) |
|
|
* |
|
|
|
20,578 |
|
|
|
1,075 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walker Smith Capital (QP), L.P.(45) |
|
|
102,350 |
(50) |
|
|
* |
|
|
|
97,250 |
|
|
|
5,100 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walker Smith International Fund, Ltd.(45) |
|
|
157,441 |
(51) |
|
|
1.32 |
% |
|
|
149,594 |
|
|
|
7,847 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weber Capital Partners, L.P.(52) |
|
|
40,654 |
(53) |
|
|
* |
|
|
|
36,434 |
|
|
|
4,220 |
(53) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Winters, Robert K.(54) |
|
|
1,037 |
(55) |
|
|
* |
|
|
|
1,020 |
|
|
|
17 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robeco WPG Opportunistic Value Fund, L.P.(56) |
|
|
98,503 |
(57) |
|
|
* |
|
|
|
93,596 |
|
|
|
4,907 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robeco WPG Opportunistic Value Overseas,
L.P.(58) |
|
|
79,932 |
(59) |
|
|
* |
|
|
|
75,950 |
|
|
|
3,982 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WS Opportunity Fund (QP), L.P.(45) |
|
|
22,415 |
(60) |
|
|
* |
|
|
|
21,304 |
|
|
|
1,111 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WS Opportunity Fund International, Ltd.(45) |
|
|
29,898 |
(61) |
|
|
* |
|
|
|
28,412 |
|
|
|
1,486 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WS Opportunity Fund L.P.(45) |
|
|
20,839 |
(62) |
|
|
* |
|
|
|
19,804 |
|
|
|
1,035 |
(6) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(63) |
|
|
1,965,446 |
|
|
|
14.9 |
% |
|
|
1,717,382 |
(64) |
|
|
248,064 |
|
|
|
2.1 |
% |
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
The names of the selling securityholders and the number of securities held by the selling
securityholders may be amended subsequent to the date of the Prospectus pursuant to Rule
424(b)(3) of the Securities Act of 1933. |
|
(2) |
|
Percentage ownership is based on 11,773,293 shares of our common stock outstanding as of
February 29, 2008. Shares of common stock subject to options, warrants or issuable upon
conversion of convertible securities currently exercisable or exercisable within 60 days from
February 29, 2008 are deemed outstanding for computing the percentage ownership of the person
holding the options, warrants or convertible securities, but are not deemed outstanding for
computing the percentage of any other person. Warrants issued in our March 2005 equity
financing are currently exercisable, and therefore the shares underlying those warrants are
included for purposes of determining beneficial ownership. The number of shares includes an
aggregate of 68,839 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(3) |
|
Assumes the sale of all shares offered in this Prospectus and no other purchases or sales of
our common stock. The number of shares includes an aggregate of 68,839 additional shares of
common stock issuable upon exercise of warrants as a result of the anti-dilution clause
described below under March 2005 Equity Financing. |
|
(4) |
|
Richard Shuster has dispositive and voting power for the shares held by Arbor Partners, L.P. |
14
|
|
|
(5) |
|
Includes 1,264 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(6) |
|
Consists entirety of additional shares of common stock issuable upon exercise of warrants as
a result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(7) |
|
Includes 2,204 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(8) |
|
The Managing Directors of Zesiger Capital Group LLP have dispositive and voting power over
the shares held by City of Milford Pension & Retirement Fund. The Managing Directors of
Zesiger Capital Group LLP currently are Albert L. Zesiger, Barrie R. Zesiger, Donald Devivo,
James F. Cleary, John Kayola and Robert K. Winters. |
|
(9) |
|
Includes 1,983 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(10) |
|
The Managing Directors of Zesiger Capital Group LLP have dispositive and voting power over
the shares held by City of Stamford Firemens Pension Fund. The Managing Directors of Zesiger
Capital Group LLP currently are Albert L. Zesiger, Barrie R. Zesiger, Donald Devivo, James F.
Cleary, John Kayola and Robert K. Winters. |
|
(11) |
|
Includes 879 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(12) |
|
Crestview Capital Partners, LLC (CCP) is the sole managing member of Crestview Capital
Master, LLC (CCM) and may be deemed to have sole voting and investment power with respect to
securities beneficially owned by CCM. CCP disclaims beneficial ownership of these securities.
The Managing Members of CCP are Stewart Flink, Robert Hoyt and Daniel Warsh, each of whom may
be deemed to have voting and dispositive power over securities beneficially owned by CCM, and
each of whom also disclaims beneficial ownership of these securities. Mr. Flink is an
affiliate of a broker-dealer and it has been confirmed to us that the securities were acquired
to be resold in the ordinary course of business and that there are no arrangements with any
other persons, whether directly or indirectly, to dispose of the securities. |
|
(13) |
|
Includes 1,762 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(14) |
|
John R. Daniels and AnnaMarie Daniels have dispositive and voting power over the shares held
by the Daniels Family Trust UTA 1993. Dr. Daniels is one of our directors. In addition to
the shares shown in the table above, Dr. Daniels has the right to acquire 26,668 shares upon
the exercise of options that are exercisable within 60 days of February 29, 2008. |
|
(15) |
|
Includes 1,322 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(16) |
|
Craig T. Davenport, who is our Chairman, President and Chief Executive Officer, has
dispositive and voting power over the shares held by Charles Schwab & Co Inc. FBO Craig T.
Davenport Roth Conversion IRA. In addition to the shares shown in the table above, as of
February 29, 2008, Mr. Davenport owned 38,929 shares, held 6,352 vested deferred stock units
and had the right to acquire 370,694 shares upon the exercise of options that are exercisable
within 60 days of February 29, 2008. |
|
(17) |
|
Includes 435 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(18) |
|
Mr. Davenport has dispositive and voting power over the shares held by Charles Schwab & Co
Inc. FBO Craig T. Davenport Sep IRA. See footnote 16 above for additional information
regarding Mr. Davenports ownership. |
|
(19) |
|
Includes 378 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(20) |
|
The Managing Directors of Excelsior Capital Management have dispositive and voting power over
the shares held by Excelsior Master Fund, LP. The Managing Directors of Excelsior Capital
Management currently are James White and Ed Lees. |
|
(21) |
|
Includes 4,065 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(22) |
|
Hayden R. Fleming and LaDonna M. Fleming have dispositive and voting power over the shares
held by the Hayden R. Fleming Revocable Trust dated as of July 19, 1995. |
|
(23) |
|
Includes 2,204 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(24) |
|
Eugene M. Weber has dispositive and voting power over the shares held by GW2001 Fund, L.P. |
|
(25) |
|
Includes 479 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(26) |
|
Larry Haimovitch has dispositive and voting power over the shares held by the Larry
Haimovitch 2000 Separate Property Revocable Trust. |
|
(27) |
|
Includes 104 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(28) |
|
The Managing Directors of Zesiger Capital Group LLP have dispositive and voting power over
the shares held by JP Morgan Trust Co. (Bahamas) Limited as Trustee U/A/D 11/3/93. The
Managing Directors of Zesiger Capital Group LLP currently are Albert L. Zesiger, Barrie R.
Zesiger, Donald Devivo, James F. Cleary, John Kayola and Robert K. Winters. |
|
(29) |
|
Includes 747 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(30) |
|
Includes 436 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(31) |
|
Ross DeMont and David Cohen have dispositive and voting power for the shares held by Midwood
Capital Partners QP, L.P. |
|
(32) |
|
Includes 701 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(33) |
|
Ross DeMont and David Cohen have dispositive and voting power for the shares held by Midwood
Capital Partners, L.P. |
|
(34) |
|
Includes 2,234 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
15
|
|
|
(35) |
|
The Managing Directors of Zesiger Capital Group LLP have dispositive and voting power over
the shares held by Norwalk Employees Pension Plan. The Managing Directors of Zesiger Capital
Group LLP currently are Albert L. Zesiger, Barrie R. Zesiger, Donald Devivo, James F. Cleary,
John Kayola and Robert K. Winters. |
|
(36) |
|
Includes 770 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(37) |
|
From March 2003 until October 2006, William J. Nydam served as our President and Chief
Operating Officer. |
|
(38) |
|
Includes 2,206 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(39) |
|
Bradbury Dyer III has dispositive and voting power over the shares held by Paragon Associates
J.V. |
|
(40) |
|
Includes 4,773 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(41) |
|
J.H. Cullum Clark has dispositive and voting power over the shares held by Prothro Family
Limited Partnership Ltd. |
|
(42) |
|
Includes 1,322 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(43) |
|
The Managing Directors of Zesiger Capital Group LLP have dispositive and voting power over
the shares held by Public Employee Retirement System of Idaho. The Managing Directors of
Zesiger Capital Group LLP currently are Albert L. Zesiger, Barrie R. Zesiger, Donald Devivo,
James F. Cleary, John Kayola and Robert K. Winters. |
|
(44) |
|
Includes 4,414 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(45) |
|
WS Capital, L.L.C. (WS Capital) is the general partner of WS Capital Management, L.P. (WSC
Management). WSC Management is the general partner of Walker Smith Capital, L.P. (WSC) and
Walker Smith Capital (Q.P.), L.P. (WSCQP) and is the agent and attorney-in-fact for Walker
Smith International Fund, Ltd., a British Virgin Islands exempted company (WS
International). WSV Management, L.L.C. (WSV) is the general partner of WS Ventures
Management, L.P. (WSVM). WSVM is the general partner of WS Opportunity Fund, L.P. (WSO)
and WS Opportunity Fund (Q.P.), L.P. (WSOQP) and is the agent and attorney-in-fact for WS
Opportunity Fund International, Ltd. (WSO International). BC Advisors, LLC (BCA) is the
general partner of SRB Management, L.P. (SRB Management). SRB Management is the general
partner of SRB Greenway Capital, L.P. (SRBGC), SRB Greenway Capital (Q.P.), L.P. (SRBQP)
and SRB Greenway Offshore Operating Fund, L.P. (SRB Offshore). Reid S. Walker and G. Stacy
Smith are principals of WS Capital and WSV, and Patrick P. Walker is a principal of WSV.
Through their control of WS Capital, Messrs. R. Walker and Smith share voting and investment
control over the portfolio securities of each of WSC, WSCQP and WS International. Through
their control of WSV, Messrs. R. Walker, Smith and P. Walker share voting and investment
control over the portfolio securities of each of WSO, WSOQP and WSO International. Steven R.
Becker is the sole principal of BCA. Through his control of BCA, Mr. Becker possesses sole
voting and investment control over the portfolio securities of each of SRBGC, SRBQP and SRB
Offshore. Pursuant to a letter agreement, Steven R. Becker may collaborate with Reid S.
Walker, G. Stacy Smith and Patrick P. Walker on investment strategies from time to time. |
|
(46) |
|
Includes 748 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(47) |
|
Includes 5,373 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(48) |
|
Includes 493 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(49) |
|
Includes 1,075 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(50) |
|
Includes 5,100 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(51) |
|
Includes 7,847 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(52) |
|
Eugene M. Weber has dispositive and voting power for the shares held by Weber Capital
Partners, L.P. |
|
(53) |
|
Includes 1,720 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(54) |
|
As noted above, Robert K. Winters, as a Managing Director of Zesiger Capital Group LLP, also
has voting and dispositive power over the shares held by City of Milford Pension & Retirement
Fund, City of Stamford Firemens Pension Fund, JP Morgan Trust Co. (Bahamas) Limited as
Trustee U/A/D 11/3/93, Norwalk Employees Pension Plan and Public Employee Retirement System
of Idaho. |
|
(55) |
|
Includes 17 additional shares of common stock issuable upon exercise of warrants as a result
of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(56) |
|
Richard Shuster has dispositive and voting power for the shares held by Robeco WPG
Opportunistic Value Fund, L.P. |
|
(57) |
|
Includes 4,907 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(58) |
|
Richard Shuster has dispositive and voting power for the shares held by Robeco WPG
Opportunistic Value Overseas, L.P. |
|
(59) |
|
Includes 3,982 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(60) |
|
Includes 1,111 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(61) |
|
Includes 1,486 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(62) |
|
Includes 1,035 additional shares of common stock issuable upon exercise of warrants as a
result of the anti-dilution clause described below under March 2005 Equity Financing. |
|
(63) |
|
Shares Beneficially Owned Prior to the Offering and Shares Offered by this Prospectus
include all 1,314,916 shares underlying the warrants issued in our March 2005 equity
financing, all of which are currently exercisable. In addition, Shares Beneficially Owned
Prior to the Offering and Shares Beneficially Owned After the Offering include 68,839
additional shares of common stock issuable upon exercise of warrants as a result of the
anti-dilution clause described below under March 2005 Equity Financing. |
|
(64) |
|
Of the 3,193,375 shares originally registered in the registration statement of which this
prospectus is a part, the selling securityholders have sold an aggregate of 1,475,993 shares
as of February 29, 2008. As a result, an aggregate of 1,717,382 shares are shown as remaining
to be offered by this prospectus, which consist of (i) an aggregate of 402,466 shares of our
common stock issued outright in our March 2005 equity financing, and (ii) an aggregate of
1,314,916 shares of common stock underlying the warrants issued in our March 2005 equity
financing. |
16
March 2005 Equity Financing
On March 10, 2005, we entered into a Purchase Agreement and a Registration Rights Agreement in
connection with a private placement of our securities to the selling securityholders for aggregate
gross proceeds of $15.6 million. Pursuant to the terms of the Purchase Agreement, we sold a total
of (i) 1,878,459 shares of our common stock (the Shares), and (ii) warrants (the Warrants) to
purchase an aggregate of 1,314,916 shares of our common stock (Warrant Shares).
Pursuant to the Purchase Agreement, each of Endocare, on the one hand, and the selling
securityholders, on the other hand, made representations and warranties regarding matters that are
customarily included in financings of this nature. The Purchase Agreement also contained certain
conditions to closing, which were satisfied prior to the closing, which occurred on March 11, 2005.
The securities sold pursuant to the Purchase Agreement have not yet been registered under the
Securities Act of 1933 and may not be offered or sold in the United States in the absence of an
effective registration statement or exemption from applicable registration requirements. Pursuant
to the Registration Rights Agreement, we were required to file a registration statement on Form S-2
within 30 days following the closing for purposes of registering the resale of the Shares and the
Warrant Shares. The Registration Rights Agreement provides that if the registration statement is
not filed with the SEC within 30 days after the closing, then we are required to make pro-rata
payments to each of the selling securityholders in an amount equal to 1% of the aggregate purchase
price paid by each selling securityholders for the Shares for each 30-day period following the
filing deadline. In addition, we have agreed to make similar payments to the selling
securityholders if the registration statement is not declared effective by the SEC prior to the
earlier of: (i) if the SEC informs Endocare that no review of the registration statement will be
made, then five business days after the later of (A) the date on which the SEC shall have informed
Endocare that no review of the registration statement will be made, or (B) the date on which we
shall have filed our internal control report pursuant to Section 404 of the Sarbanes-Oxley Act of
2002; or (ii) the ninetieth day after the closing date. Pursuant to this provision, we incurred an
aggregate of approximately $600,000 of liquidated damages in 2005 because of a delay in the
original effectiveness of the registration statement of which this prospectus is a part.
Pursuant to the Registration Rights Agreement, each of Endocare, on the one hand, and the
selling securityholders, on the other hand, have agreed to indemnify the other party and certain
affiliates against certain liabilities related to the registration statement.
Pursuant to the terms of the Purchase Agreement, each of the selling securityholders was
issued a Series A Warrant to purchase shares of common stock at an exercise price of $10.50 per
share and a Series B Warrant to purchase shares of common stock at an exercise price of $12.00 per
share. The number of shares underlying each Series A Warrant is equal to 35% of the number of
shares sold to the respective selling securityholder in the transaction. Similarly, the number of
shares underlying each Series B Warrant is equal to 35% of the number of shares sold to the
respective selling securityholder in the transaction.
17
The Warrants have an anti-dilution clause that is triggered in the event that we issue shares
of our common stock for per share consideration that is less than the exercise price then in
effect, subject to customary exceptions. This anti-dilution clause reduces the effective exercise
price of the Warrants and proportionately increases the number of shares issuable upon exercise of
the Warrants in order to protect the warrant holders against dilution of their respective ownership
interests. These additional shares issuable upon exercise of the Warrants are not registered by
the registration statement of which this prospectus is part. We have filed a separate registration
statement to register these additional shares. We may issue additional shares to Fusion Capital in
the future, which may further decrease the exercise price of the Warrants and further increase the
number of shares issuable upon exercise of the Warrants.
In the Purchase Agreement, each of the selling securityholders agreed that, prior to the
earliest to occur of (i) the termination of the Purchase Agreement, (ii) the effective date of the
registration statement covering the Shares and the Warrant Shares or (iii) the effectiveness
deadline described above, such selling securityholder will not, and will cause its trading
affiliates not to, engage, directly or indirectly, in effecting or agreeing to effect any short
sale, whether or not against the box, establish any put equivalent position (as defined in Rule
16a-1(h) under the Securities Exchange Act of 1934) with respect to our common stock, grant any
other right (including, without limitation, any put or call option) with respect to our common
stock or with respect to any security that includes, relates to or derives any significant part of
its value from our common stock or otherwise seek to hedge its position in the Shares and the
Warrant Shares. Each of the selling securityholders also agreed not to sell, contract to sell,
grant any option to purchase, transfer the economic risk of ownership in, make any short sale of,
pledge or otherwise transfer or dispose of any interest in any of the Shares or Warrant Shares
until after the date of our conference call regarding our financial results for the quarter ending
March 31, 2005, but in any event no later that June 20, 2005.
Two members of our management team, Chairman, President and Chief Executive Officer Craig T.
Davenport and our former President and Chief Operating Officer William J. Nydam, made personal
investments in the transaction in the amounts of $184,999.99 and $499,998.85, respectively. In
addition, a member of our board of directors, John R. Daniels, M.D., invested $299,999.31 in the
transaction.
In January 2005, our board of directors approved a recommendation from our management to
instruct our investment bank, Seven Hills Partners, to evaluate the potential for completing an
equity round of financing. With that decision, our management and several board members expressed
interest in participating in the round if such was executed. In order to ensure a conflict of
interest was avoided, our board established a Special Committee to manage and negotiate the terms
for the round without Messrs. Davenport and Nydam and any participating board member being involved
in the negotiations. The Special Committee negotiated the terms of this transaction with
participating investors. Messrs. Davenport and Nydam and the board members who were not on the
Special Committee were given the opportunity to participate at the terms agreed upon by the Special
Committee and the investors.
18
PLAN OF DISTRIBUTION
The selling securityholders, which as used herein includes donees, pledgees, transferees or
other successors-in-interest selling shares of common stock or interests in shares of common stock
received after the date of this prospectus from a selling securityholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of
sale, at prices related to the prevailing market price, at varying prices determined at the time of
sale, or at negotiated prices.
The selling securityholders may use any one or more of the following methods when disposing of
shares or interests therein:
|
|
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers; |
|
|
|
|
block trades in which the broker-dealer will attempt to sell the shares as agent, but
may position and resell a portion of the block as principal to facilitate the transaction; |
|
|
|
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its
account; |
|
|
|
|
an exchange distribution in accordance with the rules of the applicable exchange; |
|
|
|
|
privately negotiated transactions; |
|
|
|
|
short sales effected after the date the registration statement of which this Prospectus
is a part is declared effective by the SEC; |
|
|
|
|
through the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise; |
|
|
|
|
broker-dealers may agree with the selling securityholders to sell a specified number of
such shares at a stipulated price per share; |
|
|
|
|
a combination of any such methods of sale; and |
|
|
|
|
any other method permitted pursuant to applicable law. |
The selling securityholders may, from time to time, pledge or grant a security interest in
some or all of the shares of common stock owned by them and, if they default in the performance of
their secured obligations, the pledgees or secured parties may offer and sell the shares of common
stock, from time to time, under this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling
securityholders to include the pledgee, transferee or other successors in interest as selling
securityholders under this prospectus. The selling securityholders also may transfer the shares of
common stock in other circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
19
In connection with the sale of our common stock or interests therein, the selling
securityholders may enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the common stock in the course of hedging
the positions they assume. The selling securityholders may also sell shares of our common stock
short and deliver these securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling securityholders may
also enter into option or other transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the delivery to such broker-dealer
or other financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling securityholders from the sale of the common stock
offered by them will be the purchase price of the common stock less discounts or commissions, if
any. Each of the selling securityholders reserves the right to accept and, together with their
agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to
be made directly or through agents. We will not receive any of the proceeds from this offering.
Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price
of the warrants.
The selling securityholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet
the criteria and conform to the requirements of that rule.
The selling securityholders and any underwriters, broker-dealers or agents that participate in
the sale of the common stock or interests therein may be underwriters within the meaning of
Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the Securities Act.
Selling securityholders who are underwriters within the meaning of Section 2(11) of the
Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be sold, the names of the selling
securityholders, the respective purchase prices and public offering prices, the names of any
agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular
offer will be set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.
We have advised the selling securityholders that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of shares in the market and to the activities of the
selling securityholders and their affiliates. In addition, we will make copies of this prospectus
(as it may be supplemented or amended from time to time) available to the selling securityholders
for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The
selling securityholders may indemnify any broker-dealer that participates in transactions involving
the sale of the shares against certain liabilities, including liabilities arising under the
Securities Act.
20
We have agreed to indemnify the selling securityholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the
shares offered by this prospectus.
We have agreed with the selling securityholders to keep the registration statement of which
this prospectus constitutes a part effective until the earlier of (1) such time as all of the
shares covered by this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which the shares may be sold pursuant to Rule 144(k) of
the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the common stock offered
hereby have been passed upon by Morrison & Foerster LLP, San Diego, California.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for the year ended
December 31, 2007, and effectiveness of our internal control over financial reporting as of
December 31, 2007, as set forth in their reports, which are incorporated by reference in this
prospectus and elsewhere in the registration statement. Our financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLPs reports, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3, including exhibits and
schedules, in connection with the common stock to be sold in this offering. This prospectus is
part of the registration statement and does not contain all the information included in the
registration statement. For further information about us and the common stock to be sold in this
offering, please refer to the registration statement. When a reference is made in this prospectus
to any contract, agreement or other document, the reference may not be complete and you should
refer to the copy of that contract, agreement or other document filed as an exhibit to the
registration statement or to one of our previous SEC filings.
We also file annual, quarterly and special reports, proxy statements, and other information
with the SEC. You may read and copy the registration statement or any other document we file with
the SEC at the SECs public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. You can request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at l-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SECs website at
www.sec.gov. In addition, our SEC filings may be accessed at our website www.endocare.com
via a link to the SECs website. Information contained on our website is not incorporated into,
and does not constitute any part of, this prospectus.
21
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference into this prospectus certain information that
we file with it. This means that we can disclose important information to you by referring you to
another document that we filed separately with the SEC. The information in this prospectus updates
(and, to the extent of any conflict, supersedes) information incorporated by reference that we have
filed with the SEC prior to the date of this prospectus, while information that we file with the
SEC after the date of this prospectus that is incorporated by reference will automatically update
(and, to the extent of any conflict, supersede) the information in this prospectus. You should
read the information incorporated by reference because it is an important part of this prospectus.
We incorporate by reference the following documents that we have filed, or in the future will
file, with the SEC:
1. Our annual report on Form 10-K filed with the SEC on March 17, 2008;
2. Our current reports on Form 8-K filed with the SEC on the following dates: February 11,
2008 and March 5, 2008;
3. The description of our common stock contained in the Registration Statement on Form 10-SB
filed under Section 12(g) of the Exchange Act filed with the SEC on November 14, 1995, including
any subsequent amendment or report filed for the purpose of amending such description;
4. The description of the stock purchase rights under our stockholder rights plan contained
in the Registration Statement on Form 8-A filed under Section 12(g) of the Exchange Act filed with
the SEC on June 28, 2005, including any subsequent amendment or report filed for the purpose of
amending such description; and
5. All documents filed by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus.
The documents incorporated by reference in this prospectus may be obtained from us at no cost.
You may obtain a copy of the documents by submitting a written request to Endocares Corporate
Secretary at 201 Technology Drive, Irvine, California 92618 or by calling Endocare at (949)
450-5400. In addition, these documents may be accessed at our website www.endocare.com via a link
to the SECs website. Information contained on our website is not incorporated into, and does not
constitute any part of, this prospectus.
22
3,193,375 Shares
Endocare, Inc.
Common Stock
PROSPECTUS
, 2008
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an estimate, subject to future contingencies, of the expenses to be incurred
by us in connection with the issuance and distribution of the securities being registered. None of
the following expenses will be borne by the selling securityholders.
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Registration Fee |
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$ |
3,777 |
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Legal Fees and Expenses |
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150,000 |
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Accounting Fees and Expenses |
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125,000 |
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Printing and Engraving Fees |
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Listing Fees |
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Transfer Agents Fees |
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700 |
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Miscellaneous |
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Total |
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$ |
279,477 |
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Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware Corporation Law provides that a Delaware corporation may indemnify
any person against expenses, judgments, fines and settlements actually and reasonably incurred by
any such person in connection with a threatened, pending or completed action, suit or proceeding in
which he is involved by reason of the fact that he is or was a director, officer, employee or agent
of such corporation, provided that (i) he acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the corporation, and (ii) with respect to any
criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful. If
the action or suit is by or in the name of the corporation, the corporation may indemnify such
person against expenses actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, except that no indemnification
may be made in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation for negligence or misconduct in the performance of his
duty to the corporation, unless and only to the extent that the Delaware Court of Chancery or the
court in which the action or suit is brought determines upon application that, despite the
adjudication of liability but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
As permitted by Section 102 of the Delaware General Corporation Law, the Company has adopted
provisions in its restated certificate of incorporation and amended and restated bylaws that limit
or eliminate the personal liability of its directors for a breach of their fiduciary duty of care
as a director. The duty of care generally requires that, when acting on behalf of the Company,
directors exercise an informed business judgment based on all material information reasonably
available to them. Consequently, a director will not be personally liable to the Company or its
stockholders for monetary damages or breach of fiduciary duty as a director, except for liability
for:
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any breach of the directors duty of loyalty to the Company or its stockholders; |
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any act or omission not in good faith or that involves intentional misconduct or a
knowing violation of law; |
II-1
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any act related to unlawful stock repurchases, redemptions or other distributions
or payment of dividends; or |
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any transaction from which the director derived an improper personal benefit. |
These limitations of liability do not affect the availability of equitable remedies such as
injunctive relief or rescission.
As permitted by Section 145 of the Delaware General Corporation Law, the Companys amended and
restated bylaws provide that:
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the Company may indemnify its directors, officers and employees to the fullest
extent permitted by the Delaware General Corporation Law, subject to limited
exceptions; |
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the Company may advance expenses to its directors, officers and employees in
connection with a legal proceeding to the fullest extent permitted by the Delaware
General Corporation Law, subject to limited exceptions; and |
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the rights provided in its amended and restated bylaws are not exclusive. |
The Company has entered into indemnification agreements with each of its directors, as well as
with certain officers, employees and consultants. These indemnification agreements provide that
the Company holds harmless and indemnifies each such director, officer, employee and consultant to
the fullest extent authorized or permitted by law. In addition, subject to certain conditions,
these indemnification agreements provide for payment of expenses (including attorneys fees)
actually and reasonably incurred in connection with any threatened, pending or completed proceeding
to which the indemnified director, officer or employee is, was or at any time becomes a party, or
is threatened to be made a party, by reason of the fact that he or she is, was or at any time
becomes a director, officer, employee or agent of the Company, or is or was serving or at any time
serves at the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. In
addition, the Company has purchased policies of directors and officers liability insurance, which
insure the Companys directors and officers against the cost of defense, settlement or payment of a
judgment in some circumstances.
Item 16. Exhibits and Financial Statement Schedules
A list of exhibits filed with this Registration Statement is set forth on the Exhibit Index
following the signature page. The Exhibit Index is hereby incorporated by reference herein.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
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(i) |
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To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; |
II-2
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(ii) |
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To reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement; and |
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(iii) |
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To include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material change to such
information in this registration statement; |
provided, however, that paragraphs (i), (ii) and (iii) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is contained in reports
filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference into the registration statement,
or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
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(i) |
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If the registrant is relying on Rule 430B: |
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(A) |
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Each prospectus filed by the registrant pursuant to Rule 424(b)(3)
shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the
registration statement; and |
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(B) |
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Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii), or (x) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part
of and included in the registration statement as of the earlier of the
date such form of prospectus is first used after effectiveness or the
date of the first contract of sale of securities in the offering
described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of
the registration statement relating to the securities in the
registration statement to which that |
II-3
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prospectus relates, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such
effective date; or |
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement as of the date it
is first used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first use.
(b) The undersigned registrant hereby further undertakes that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the registrants annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to existing
provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this post-effective amendment no. 3 to registration statement (no. 333-123866) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California,
on March 19, 2008.
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ENDOCARE, INC.
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By: |
/s/ Craig T. Davenport
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Craig T. Davenport |
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Chairman, President and Chief Executive Officer |
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Pursuant to the requirements of the Securities Act of 1933, this post-effective amendment no.
3 to registration statement (no. 333-123866) has been signed by the following persons in the
capacities and on the dates indicated:
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Signature |
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Title |
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Date |
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/s/ Craig T. Davenport
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Chairman, President and Chief
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March 19, 2008 |
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Craig T. Davenport
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Executive Officer (principal
executive officer) |
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/s/ Michael R. Rodriguez
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Senior Vice President, Finance
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March 19, 2008 |
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Michael R. Rodriguez
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and Chief Financial Officer
(principal financial and
accounting officer) |
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*
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Director
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March 19, 2008 |
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John R. Daniels, M.D. |
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*
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Director
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March 19, 2008 |
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David L. Goldsmith |
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*
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Director
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March 19, 2008 |
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Eric S. Kentor |
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*
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Director
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March 19, 2008 |
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Terrence A. Noonan |
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*
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Director
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March 19, 2008 |
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Thomas R. Testman |
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*By:
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/s/ Michael R. Rodriguez |
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Michael R. Rodriguez |
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Attorney-in-Fact |
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II-5
EXHIBIT INDEX
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Exhibit No. |
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Description |
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2.1(1)
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Stock Purchase Agreement, dated as of January 13, 2006, by
and among Plethora Solutions Holdings plc, Endocare, Inc. and
Timm Medical Technologies, Inc. The schedules and other
attachments to this exhibit were omitted. The Company agrees
to furnish a copy of any omitted schedules or attachments to
the Securities and Exchange Commission upon request. |
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2.2(2)
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$1,425,000 Secured Convertible Promissory Note, dated as of
February 10, 2006, from Plethora Solutions Holdings plc to
Endocare, Inc. |
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3.1(3)
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Certificate of Amendment of Restated Certificate of
Incorporation of the Company. |
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3.2(3)
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Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company. |
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3.3(3)
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Restated Certificate of Incorporation. |
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3.4(4)
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Amended and Restated Bylaws of the Company. |
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3.5(5)
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Amendment No. 1 to Amended and Restated Bylaws of the Company. |
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4.1(6)
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Form of Stock Certificate. |
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4.2(7)
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Form of Series A Warrant. |
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4.3(7)
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Form of Series B Warrant. |
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4.4(8)
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Rights Agreement, dated as of March 31, 1999, between the
Company and U.S. Stock Transfer Corporation, which includes
the form of Certificate of Designation for the Series A
Junior Participating Preferred Stock as Exhibit A, the form
of Rights Certificate as Exhibit B and the Summary of Rights
to Purchase Series A Preferred Shares as Exhibit C. |
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4.5(9)
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Amendment No. 1 to Rights Agreement, dated as of September
24, 2005, between the Company and U.S. Stock Transfer
Corporation. |
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5.1(10)
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Opinion of Counsel. |
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23.1
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Consent of Independent Registered Public Accounting Firm. |
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23.2(10)
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Consent of Counsel (included in Exhibit 5.1). |
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24.1(11)
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Power of Attorney for Directors Other than David L. Goldsmith. |
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24.2(12)
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Power of Attorney for David L. Goldsmith. |
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(1) |
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Previously filed as an exhibit to our Form 8-K filed on January 18, 2006. |
II-6
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(2) |
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Previously filed as an exhibit to our Form 10-K filed on March 16, 2006. |
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(3) |
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Previously filed as an exhibit to our Registration Statement on Form S-3 filed on September
20, 2001. |
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(4) |
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Previously filed as an exhibit to our Form 10-K filed on March 15, 2004. |
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(5) |
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Previously filed as an exhibit to our Form 8-K filed on March 5, 2008. |
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(6) |
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Previously filed as an exhibit to our Form 10-K for the year ended December 31, 1995. |
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(7) |
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Previously filed as an exhibit to our Form 8-K filed on March 16, 2005. |
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(8) |
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Previously filed as an exhibit to our Form 8-K filed on June 3, 1999. |
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(9) |
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Previously filed as an exhibit to our Form 8-K filed on June 28, 2005. |
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(10) |
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Previously filed as an exhibit to our Form S-2 filed on April 4, 2005. |
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(11) |
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Included on the signature page of our Form S-2 filed on April 4, 2005. |
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(12) |
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Previously filed as an exhibit to our Post Effective Amendment No. 1 on Form S-3 filed on
March 20, 2006. |
II-7